(Product) Red Responds To Dell Pricing Controversy

By consumerist.comJanuary 28, 2008

Responding to a Dell pricing controversy that boiled over last week, a spokesperson for (Product) Red, an initiative whereby company color some of their products red and donate a portion of the profits to an AIDS fighting charity, left a comment on our blog to try dispel some of the confusion they felt had arisen over the issue. At stake was a computer Dell sells for $1,299 that you can get in the (Product) Red version for $1,599, with $80 of it going to the Global Fund. What about the other $220, asked gizmo blog Engadget? Well, we could tell them that it’s because you’re getting Windows Vista Ultimate and Microsoft Office and Student 2007 instead of Windows XP and Microsoft Works, but we’ll let the comment from Bich Ngoc Cao of (Product) Red do the talking…

We’ve been following all of the discussion that our recent partnership announcement has created. While most of it has been very positive, it seems there is a lot of confusion around the pricing of the (PRODUCT) RED offering. Above and beyond the entry level XPS ONE, the (PRODUCT) RED version offers Windows Vista Ultimate and Microsoft Home Office and Student, a $300 value of upgrades when purchasing through DELL.

We’re aware that not everyone will need or want these upgrades. (RED) is not about buying something for charity – it is about doing good while you are buying something you need. For those consumers who are in the market for a DELL XPS ONE with WINDOWS VISTA ULTIMATE, the (PRODUCT) RED option gives them the opportunity to get all of these features AND trigger an $80 contribution to the Global Fund to help fight AIDS in Africa, at no additional cost. For those consumers who are not in the market for this type of full-featured experience, they have the option to purchase another DELL PC that meets their needs.

(RED) is just one tool for people to do good – it doesn’t replace the need or desire for charity donations, volunteering or getting involved in other ways. It is simply a choice when you’re out shopping for something you need.

Most of the discussion demonstrates an enthusiasm for these partnerships and a desire to have more (PRODUCT) RED PCs available at a broader price range. We are also very excited about the potential of the DELL & MICROSOFT partnerships – which are just starting with these products. These new partnerships will help increase overall awareness of the AIDS epidemic in Africa and increase contributions to buy lifesaving ARV treatment for those who cannot afford it.

If you have any questions, feel free to contact (RED) at info@joinred.com.

Thank you,
bn
(RED)

It seems the internets are better at getting angry than doing math. Would donating $300 directly to the Global Fund do more good? Absolutely, but not everyone shopping for a Dell is going to do that, while they might, however, check off a different box at checkout and opt for the (Product) Red computer. Last time we checked, $57 million donated to fighting AIDS, tuberculosis and malaria was a good thing.

Came here to say that. Shame on Dell and everyone involved. The spirit of the campaign is to take a hit, as Cheviot says, and make that donation themselves. Instead, they force the consumer to “upgrade” if they want to donate and buy the pc, and profit off of it.

There’s AIDS in Africa!?! Alert Bill Gates. He already knows? So does the rest of the world? Oh.

Red has been going on for a while, has anyone heard any reports of the number of people treated or any other report of the program in work? There’s a difference between getting pumped to do something and actually putting the ‘nose to the grindstone’ and just doing it.

@balthisar: the problem is that they are charging the retail for the software… when they get it for MUCH much cheaper. The software exists just so they can make a bigger profit, unlike say Apple who sells the iPod nano for the same price and donates what would have been their profit instead.

Congrats everyone, for finally realizing that product RED is a shill to take your money. If you’ve ever looked at their actual donation percentage to charity, it’s pretty sad, but the person in charge did admit that they are not a non-profit.

So far as I can tell, it isn’t about getting the company to donate. Nearly every RED product I’ve seen has been priced higher. The consumer is typically the one actually donating, just indirectly and inefficiently.

Whats the big deal? For an average joe uneducated consumer (by that I mean uneducated on the product they are purchasing, not uneducated in general) they get to purchase themselves a new toy, maybe make a little difference in the world and feel better about themselves.

So the company made a profit, big deal, thats the point of running a business.

@belisle: 299 is the RETAIL price for that software, its NOT the WHOLESALE price for it, its what the suggested price from Microsoft is.

Vista U + Home and Student if you where to get the WHOLESALE price from Microsoft is roughly 40 dollars. As a school we can get the two for less than 100 a license

So Dell is making 179 dollars pure profit without counting hardware, where Dell makes a huge profit based on their manufacturing model of getting the cheapest parts possible wholesale. This is in part why no two models from Dell could have the same hard drives, optical drives, or in the past even motherboard manufacturer.

Here is the deal–they have one product, which they sell for $1599, which includes an $80 donation to charity. They also sell a product for $1299 which has different features, but it doesn’t include any donation to charity. It is exactly the same as Apple carrying a $199 ipod nano with a donation to charity, but a $149 ipod nano (with different features) with no donation to charity.

Some part of the outcry has to be because Dell and Microsoft are involved. If you are relying on a major electronics purchase to give to charity and you don’t believe companies should charge (retail, not what you “think” they should charge) for software, then you are both a scoundrel and an idiot.

@belisle: The issue with this is the fact the concept of (red) is they are supposed to be donating the profit to the program. The way they set up the package, they are going to be making more profit from someone buying (red) and having to get the upgraded software vs someone who just bought the normal hardware.

Compare this to other retailers like the aformentions Apple, whos (red) offerings cost exactly the same as their normal model, and you can see where people are pissed at what Dell is trying to pull.

@Falconfire: None of the companies donates all of their profit on the product to charity. None. Apple never donated all of the profit. If you go to their website, they say that they donate part of the profit.

The whole red thing is pretty stupid. If you want to buy consumer electronics, buy consumer electronics. If you want to give to a charity, give to a charity. Don’t try to confuse this marketing by Dell and by Apple (or your desire for more gadgets) as any sort of philanthropy.

I’m always weary of programs like product(RED). It doesn’t really seem the companies really donate anything; they increase the price of a product and then make a donation out of the increase.

Also, it keeps people from claiming the “donation” in their taxes, and allows the corporations to basically claim the contribution and get a tax break.

This is why I don’t buy the “pink” labeled anything for breast cancer.

By the by, has anyone else noticed that companies are starting to take advantage of people who feel guilty about something, simply to make more money? Examples include being “green”, product(RED), breast cancer.

@varco: Your obviously completely oblivious to what Dells doing, which I guess is why Dell is able to get away with using software to mark something up as opposed to hardware.

Apple doesnt mark up its (red) iPod, its the same if you bought it (red) or normally. Same hardware, differet color and the percentage of their profits goes to the (red) fund.

Dell DOES mark up their computer for (red) they add a extremely cheap software package on their end, for the retail price on the consumer end, which depending on who you talk to could be anywhere from a 100 to 250 dollar markup from what it would in reality cost Dell, netting them a decent profit even AFTER they donate to the charity.

Yes your getting a little bit more, but the whole point of the program is for Dell to sell the computer sans software package, and eat the profits they would normally make of it by donating to the fund. Instead they are making MORE profit than they normally would, since the general public would never purchase Vista Ultimate since they dont really need what it offers over the stock Vista install on the machine.

Now the Student and Teacher edition IS a decent package for Office, and I would say anyone who could get it, should since most people have little use for anything beyond Excel and Word these days and if they did would already have the package they need at home. But the kicker with that one is when you normally buy Student and Teacher, your getting THREE licenses to use the software on THREE different machines. So your really paying for 2 extra licenses of the software that you probably have little use for, and cant give to other people.

Sorry, I’ll make my own donations to the groups I choose and get the tax deduction at the same time.

And, I will certainly NEVER give to any program endorsed by bono. He’s great at telling governments and people how to spend their money. But when it comes to U2, he moves the operation from Ireland to Holland to avoid taxes… In other words, he’s great at spending other peoples’ money.

Also if all of these companies donate the marketing dollars (for just the product Red campaign) towards the global fund instead of marketing then I believe that they would end up doing more good. see wikipedia “Product Red”

@coren:
I think you’re missing the point of Product (Red). Sure you can donate. Anyone can donate, but it’s generally something you do in the privacy of your own home. Product (Red) is not only getting the donations, but they’re also raising awareness and bringing the effort mainstream. Product (Red) products have the opportunity to become Livestrong bracelet-esque where having a red iPod or red Chuck Taylors is the “cool” thing to do. You can show your support for the cause while going about your normal activities and get people involved that normally wouldn’t contribute because it’s virtually effortless.

@sohmc:
That’s why everyone’s so angry about Dell. Other Product(Red) partners DONT charge anything extra. You simply get the same product in a different color and the company absorbs the hit for the donation.

@varco:
Amazing. Are your ancestors ostriches?? Even after numerous patient explanations you still bury your head in the sand and refuse to read.

2. Doesn’t “Red” care that the euros found a 95% success cure for HIV last year, or is this just about PR?

3. Dell sucks.

4. If I want to do something good for charity, I’ll make a direct donation, tyvm.

5. Not trying to sound mean, but I honestly Don’t care about AIDS in Africa. I care about AIDS in america, and poverty in america, and fighting crime in america, and the problem with meth in america. The biggest problem Africa has is the fact that the country is piss poor. And those nigerians with their internet cafes aren’t making things any easier.

6. Price fixing “Charities” have always been a scam to companies like Wal-Mart and Mcdonalds.

$300 in added value for Vista, thats a load of crap, Vista is one of the worst OS ever, I returned a dell computer because it had vista and I have a week of talking three hours a day to tech support(which was great tech support) that prompted that, then I spend $400 bucks more to get the XPS 710 that had XP now I have no problems at all.All in all Dell got about 3k from me for my computer and monitor. I love my computer but they need to provide XP for those people that want a stable OS.

Simpson’s reference applies:
“Krusty, what are your plans for the royalties?”
“We got to pay for promotion,shipping, distribution. You know, those limos out back aren’t free. Whatever’s left, we throw down the well. “

Red is a scam because when you do the math, companies spend more money on marketing for the program than is actually generated. The point is that there isn’t much philanthropy going on. Just a bunch of corporate marketing sleazeballs suckering you to chip in so they don’t have to.

Don’t like it? Don’t buy it. Donate the money to charity yourselves. Dell’s not forcing anybody to buy the product. Other than the colour, there’s nothing in the PC that you can’t get in another model.

Why are people so upset about this? They’re getting all worked up about nothing. Maybe their time would be better spent volunteering for charity rather than complaining about the price of Dell laptops.

This is a Dell and Microsoft (red) product. If you look at the press conference pictures, Bill Gates is all up in there. They bundle the software (Office + Premium Vista @ MSRP $300) and the computer (MSRP $1299) because you can’t really sell (red) software. So there it is.

Now, no one else sells (red) products at less than MSRP. Not Apple, not Armani, not Converse, not Hallmark, not anyone. You may question the value of the product itself, but it is not ripping off anyone to sell a product at MSRP. It sounds like some of you want the fashion statement that says that you gave to charity (gotta let everyone know) while purchasing a major consumer electronics purchase, while also getting a discount.

If you want to make a real difference, go buy a $400 dell and give $1200 to charity. Or just volunteer your time somewhere.

As cited, other companies actually go thru the trouble (and expense) of creating a NEW (red) product that’s colored red. Then eats the cost and sells it at a normal price, with no MSP pricing shenanigans. Case in point – as (almost) always – Apple.

As a manufacturer whose sales dwarf those of Apple, it’s sad that Dell can’t even meet this.

I guess that’s why Apple customers are more more satisfied than Dell ones.

@fearuncertaintydoubt: That’s exactly what I was going to say. I’ve read past articles outlining the cost/profit/donation for Red items and it’s not philanthropy. Less than 10% of the jacked up prices (e.g.: Gap Red t-shirts) are actually donated. Yes, it’s worthwhile to donate money but I think that retailers are doing a crappy thing by exploiting the feeling of “easy philanthropy”.

I wouldnt donate to any charity or cause because for the simple fact that never 100% of my money ever donated goes to that cause, some pig always has to have their share of the profit in some way or margin or method.